1、Unit 8 Text:International Trade（国际贸易）1.Key words2.Reasons and benefits from international trade3.Absolute advantage4.Comparative advantage5.Terms of trade6.Trade protection7.Questionsnatural resourcescomparative costnet gaincomparative advantageabsolute advantagecomparative disadvantageproduction po
2、ssibility boundarydiminishing returnsopportunity cost ratioterms of tradeterms of trade indexrestrictions on tradeexchange control regulationphysical controlbalance of payments deficitstrategically important industrydubious argumentbarriers to international tradefree-trade zone2.1 Reasons for intern
3、ational trade2.2 Benefits from international tradeDue to climatic differences some goods would not be available in many parts of the world without trade.Natural resources are not evenly distributed throughout the world.Skills and technology are also not distributed evenly,and whilst some countries h
4、ave a high level of technological development others have a much lower level,both will therefore tend to produce goods of a different nature.Because factors of production and natural resources tend to be immobile,it is more convenient to specialize in the production of those goods in which there is
5、a natural,or acquired advantage,and trade the surplus not required for domestic consumption for those goods which cannot be produced.It is far more efficient for each country to use its resources in the production of those goods which are not produced.Specialization and trade increase world output a
6、nd enable everybody to enjoy a higher standard of living than would be otherwise available.A wider variety of goods are made available to more people.The law of comparative costs shows that countries can gain from specialization and trade provided that there is some difference in the relative costs
7、of producing those goods.3.1 Assumption3.2 Before specialization3.3 After specializationsuppose there are two countries X and Y.Both produce just two goods,beef and cars.Both countries have an equivalent amount of capital and labor but X has abundant grasslands and suitable climate for beef producti
8、on whilst Y has less favorable climate and agricultural conditions but a more highly skilled workforce.There are no unemployed factors in either country.Both countries are using their resources equally to produce both goods.CountryBeef(Units)Cars(Units)X1000200Y2001000Total production before special
9、ization12001200CountryBeef(Units)Cars(Units)X20000Y02000Total production before specialization200020004.1 Assumption4.2 Before specialization4.3 After specializationIf one country is more efficient in the production of both goods,i.e.has an absolute advantage,then it may still be worthwhile engaging
10、 in trade if one country specializes in the production of those goods in which its disadvantage is least;referred to as least comparative disadvantage,and the other country those goods in which the comparative advantage is greatest.Suppose that country X was more efficient in the production of both
11、beef and cars.CountryBeef(Units)Cars(Units)X1000600Y900200Total production before specialization1900800CountryBeef(Units)Cars(Units)X2001080Y18000Total production before specialization20001080Gain1002805.1 Definition of terms of trade5.2 Terms of trade indexThe terms of trade refer to the rate at wh
12、ich one nations goods can be exchanged for those of others.The term of trade are measured by means of a terms of trade index.Terms of trade index=(index of export prices/index of import prices)100The base year of the index is 100.An improvement in the terms of trade is said to be favorable and shows
13、 as an increase in the index,indicating that a given volume of exports can be exchanged for a greater volume of imports.A fall in the index is said to be unfavorable as a given volume of exports can only be exchanged for a smaller volume of imports.6.1 Protectionism6.2 Forms of restrictions on trade
14、 6.3 Reasons for restrictions on trade 6.4 Costs of protectionDespite the gains from free international trade,nations have frequently attempted to restrict the amount of trade in order to protect their domestic economies from the effects of foreign competition.The competition may be from lower cost
15、producers due to either,or both,greater efficiency and lower wage costs.Such an attitude is referred to as“protectionism”.TariffsQuotasSubsidiesExchange control regulationPhysical controlsProtecting a new or developing industrythe“infant industry case”.Assisting in the elimination of a balance of pa
16、yments deficit.Protecting the domestic economy against unemployment caused by too many imported goods.Protecting strategically important industries such as iron,steel and shipbuilding.Protecting the domestic economy from“unfair”competition,in particular“dumping”where excess production is sold abroad
17、 at cost in order to cover marginal costs only,and allow profits to be made on the domestic market,or where“cheap”labor is being used.6.4.1 Industries6.4.2 Consumers6.4.3 CountriesIn the long run protection from competition results in a loss of efficiency and inventiveness.When eventually industries
18、 have to face international competition again,they will be weak and ill-equipped to do so.Consumers are forced to pay higher prices and have a restricted choice of goods.Trade is possibly the best way of forging links between countries and promoting international co-operation.Attempts to interfere w
19、ith trade generally result in some form of retaliation which may lead to a disastrous trade war where everybody loses.(1)What would give a countrys international trade an absolute advantage?A comparative advantage?How would such advantages influence a decision to sell to foreign markets?(2)How is the“terms of trade index”calculated?(3)Why do governments restrict imports?What are the costs of trade protection?(4)Gather information on the most popular types of Chinese exports andimports.How does comparative advantage help explain why China eitherexports or imports these goods?
